Problem $11-05$

Jersey Jewel Mining has a beta coefficient of $1\mathrm{.}6.$ Currently the risk$-$free rate is $1$ percent and the anticipated return on the market is $7$ percent. $J$ m pays a

$$4\mathrm{.}80$ dividend that is growing at $5$ percent annually. Do not round intermediate calculations.

a$.$ What is the required return for JJM$?$ Round your answer to two decimal places.

$\%$

b$.$ Given the required return, what is the value of the stock? Round your answer to the nearest cent.

$

c$.$ If the stock is selling for $$109,$ what should you do$?$

The stock

overvalued and

be purchased.

d$.$ If the beta coefficient declines to $1\mathrm{.}4,$ what is the new value of the stock? Round your answer to the nearest cent.

$

e$.$ If the price remains $$109,$ what course of action should you take given the valuation in $d?$

The stock is

and

be purchased.